Letter: Buying a pension

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The Independent Online
Sir: John Chapman ("The ghost of scandals past", 13 December) asks what his table of ratings for personal pension plans tells us. The answer is: nothing much.

By assuming that all plans have exactly the same rate of growth, he isn't, as he claims, comparing returns at various stages in the life of a pension. All he is doing is comparing charges.

This is like choosing a car not on size, comfort, economy or performance, but purely on price. If you want a Mini-sized pension, then by all means go for the lowest price you can find. But our market research has consistently shown that people care most about the financial security of their pension provider, followed by good, consistent medium- to long-term financial performance and the ability to offer reliable financial advice. Price comes a long way down the list.

He also rather misses the point in his criticism of transfer and paid- up values. Provided they have been well advised, everyone taking out a pension plan will know that they are making a long-term commitment which gives the best value when maintained to maturity.

Many people who do stop contributing to a plan don't have any choice in the matter. Many will have changed jobs and been forced to give up their personal pension for an occupational scheme, because employers who already run occupational pension schemes can refuse to pay into a personal scheme. A change in the law to make personal pensions truly portable by requiring employers to pay in a fair amount would instantly cut the number of people having to take transfer or paid-up values.

Tony Reardon

Pensions Development Director

Allied Dunbar Assurance plc